Mahindra sells Swaraj Mazda stake to Sumitomo

Auto major Mahindra & Mahindra (M&M), on Tuesday, sold its 14.04% stake in Swaraj Mazda to Sumitomo Corporation of Japan for Rs 40.03 crore. Sumitomo has agreed to acquire the 14.72 lakh shares held in Swaraj Mazda by Punjab Tractors, a group company of M&M, at Rs 272 per share through inter-se-transfer, it informed the stock exchanges.

After the acquisition Sumitomo, which had 39.39% stake in Swaraj Mazda earlier, will now be majority shareholder of the firm with 53.52% stake. The proposed date of acquisition is January 6, it added.

M&M had acquired 64.64% stake in Punjab Tractors (PTL) in March last year for over Rs 1,400 crore. It bought off private equity firm Actis' 43.3% stake in the company and followed it up with an open offer for 20%. In October this year, M&M got shareholders' approval to amalgamate PTL with itself. It was by virtue of this acquisition that Swaraj Mazda became a part of M&M.

According to industry experts, it is a deliberate move on the part of Mahindra to offload stake from a company that is not getting volumes in the commercial vehicle segment, more so because the entire automobile industry is going through a slowdown. At an economic slowdown like this and the fact that margins of all companies are under tremendous pressure, it makes sense for Mahindras to sell their stake as Swaraj Mazda volumes continue to be really low, says an industry expert.

Swaraj Mazda, which is present both in the medium and heavy commercial vehicle segment (M&HCV) and the light commercial vehicle segment (LCV), witnessed a steep drop in sales in November.

According to the Society of Indian Automobile Manufacturers', while its M&HCVs witnessed a dip of 91% in sales at 36 units in November this year as against 449 units during the same month last year, its LCVs registered a decline of 5.4% at 212 units vis--vis 224 units in November last year.

While the overall M&HCV segment declined by 62.9% at 8,325 units as compared to 22,453 units in November 2007, the total LCV sales went down by 33.2% at 12,312 units last month as against 18,426 units during the corresponding month last year, bringing down the overall commercial vehicle segment by 49.5% at 20,637 units vis--vis 40,879 units in November last year.